with Ed Maxwell

Bias cuts into the bottom line

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Photo courtesy Pixabay

When some execs hear about diversity and inclusion (D&I) initiatives, their first thought is of incremental costs. However, not having D&I is far more expensive. Indeed, a lack of D&I not only increases costs but also decreases the potential for revenue growth.

Increased costs

Bias in the workplace, a major barrier to developing D&I, raises costs. Turnover costs at least 20% of a position’s annual salary, and biased behavior in the workplace causes some employees to exit faster than they otherwise would. One in four doctors from non-dominant groups reported leaving positions due to biased behavior, with some even saying they considered leaving medicine altogether.

Businesses that achieve genuine inclusion can recruit from a much wider candidate pool to acquire the best employees. With the shifting demographics in the U.S., a true commitment to D&I functions as a significant competitive advantage for companies that can attain it.

Reduced revenue potential

Revenue growth potential suffers without diversity. As reported in the Financial Times, extensive research shows that diverse companies were 45% more likely than their peers to have grown their market share. What’s more, diverse companies were 70% more likely to have captured new markets.

That should come as little surprise. With ever-increasing global diversity, companies that embrace diversity can better target potential consumers. In fact, when teams have members who belong to the same identities as target consumers, the whole team is 158% more likely to know the habits and attitude of these consumers. The team can then adjust marketing and even the products themselves to best suit these consumers.

The key lesson is that companies that embrace D&I experience better financial results. In its report “Why Diversity Matters,” McKinsey notes that companies in the upper quartile in terms of gender and racial diversity achieve higher profits than those that have less diversity.